India bonds jump on Mideast peace proposal, 10-year yield slides most in 15 weeks

MUMBAI: Indian bonds surged on Monday, with the 10-year yield falling the most in nearly 15 weeks, on hopes of an end to the Middle East war after the U.S. and Iran received the framework for a plan to end their five-week-old conflict.

U.S. President Donald Trump had earlier threatened to unleash “hell” on Tehran unless it agrees by the end of Tuesday to a deal that would allow traffic to resume through the critical energy chokepoint. Iran has ruled out any immediate reopening of the Strait of Hormuz.

India’s benchmark 6.48% 2035 bond yield eased about 9 basis points to 7.0458%, its biggest single-day drop since December 24.

The yield fell for the first time after advancing for the previous 12 sessions. Bond yields move inversely to prices.

The market also cheered likely purchases by the Reserve Bank of India last week and a slimmer-than-expected state borrowing calendar.

Clearing house data showed a cohort of investors that includes the RBI and other long-term investors net bought 96 billion rupees ($1.03 billion) of bonds on Thursday.

States said they will sell about 2.54 trillion rupees of bonds in April-June, below market expectations of 3 trillion rupees.

Separately, traders pulled overnight index swaps lower before the RBI policy decision on April 8.

“I am not expecting any changes in policy rates or stance,” said Alok Singh, head of treasury at CSB Bank, adding that the RBI may raise its inflation forecast, while lowering its growth projections.

Rates

The one-year OIS rate fell 19.25 bps to 6.18%, while the most liquid five-year rate eased 14.5 bps to 6.6950%, both logging their biggest declines in three years.

The two-year rate fell 14 bps to 6.64%, falling the most in more than 16 months.